In a non-ordinary state of consciousness, especially one in which one is removed from physical reality; in a trance; out of it; out to lunch; dreaming while awake. Probably derived from 'The Twilight Zone', a TV program dealing with fantasy, science fiction, the occult, etc. Also 'zoned out', 'zoning'.
The driver of the truck that hit me seemed to be completely zoned -- the cops took him away, and left me sitting on the curb.
-- I'm by myself, but I'm not alone / I spend a lot of time in the Twilight Zone. -- (James Taylor)